1. Vodafone retro tax case: Govt behaviour unfortunate

Vodafone retro tax case: Govt behaviour unfortunate

Though the government refused to scrap the retrospective tax after it came to power two years ago, it signalled its intent to mete out justice by saying it would accept the rulings of various courts—presumably that included arbitration tribunals—on these cases.

By: | Published: November 15, 2016 6:21 AM
The government seemed to prove its bona fides by saying it would not challenge two judgments by the Bombay High Court that went against it in cases against Shell and Vodafone, though it later went and changed its mind on one of them. (Reuters) The government seemed to prove its bona fides by saying it would not challenge two judgments by the Bombay High Court that went against it in cases against Shell and Vodafone, though it later went and changed its mind on one of them. (Reuters)

Though the government refused to scrap the retrospective tax after it came to power two years ago, it signalled its intent to mete out justice by saying it would accept the rulings of various courts—presumably that included arbitration tribunals—on these cases. That still made sense since, while the Opposition would allege cronyism if the government repealed the retrospective tax law, it couldn’t say the same of court judgments. The government seemed to prove its bona fides by saying it would not challenge two judgments by the Bombay High Court that went against it in cases against Shell and Vodafone, though it later went and changed its mind on one of them. What was equally surprising is that despite looking like it encouraged arbitral awards in the retrospective tax cases, the government kept arguing tax matters could not be arbitrated. Worse, in various cases, the government delayed the appointment of arbitrators—the Cairn Energy tax case, for instance, has just celebrated its 1,000-day anniversary.

In the case of Vodafone, news agency PTI reported over the weekend, the government’s attempt to delay one arbitration case has been scuttled. According to PTI, while the UK telco had filed two cases, arbitrators have been appointed in only one case. In this case, the one filed under the Indo-Dutch treaty, the two sides had nominated one arbitrator each and, when there was no agreement on the umpire arbitrator, Vodafone asked the International Court of Justice (ICJ) to nominate the umpire. When the ICJ nominated Sir Franklin Berman, instead of moving on with the case, the government chose to challenge the ICJ appointment on grounds Berman, PTI reported, was a British national and faced a conflict of interest since Vodafone is a UK company. By that logic, of course, the government’s ambition to make India the seat of global arbitration could take a hit if Indian arbitrators were appointed in various cases. More important, since any arbitral award has to be enforced in India, this is going to be the next challenge—in the Antrix-Devas case where the award went against the Isro-subsidiary, Antrix has filed a case challenging the foreign arbitration award and it is anyone’s guess as to how long it will take to be enforced. Given how the BJP made the UPA’s ‘tax terrorism’ a big part of its election campaign, foreign investors would have thought a BJP victory signalled the end of tax terror—sadly, that’s a hope that is nowhere near being realised.

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